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Standard & Poor's officially downgrades U.S. debt
Traders work on the floor of the New York Stock Exchange as concerns about the health of the American economy continue grow.
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Kai Ryssdal talks with Marketplace New York bureau chief Heidi Moore and CNBC's John Carney about the breaking news of the afternoon: Standard & Poor's decision to officially downgrade U.S. long-term debt from AAA status to AA+.
Here's how Moore explained it:
Heidi Moore: They downgraded the U.S. credit rating. It's like cutting our credit score. We went from a AAA to a AA+ -- which is more than people expected; people thought we'd just be a AA. The importance of this is largely psychological -- we've always been a AAA country. But now that we are a AA+, that's what everyone else will be too. I think everyone else will follow us.
Carney agreed that other countries would be downgraded as well:
John Carney: Remember, we're the country that supports people when they get in trouble. If our credit rating is lower, so is everybody else's.
To stay optimistic:
Moore: The same way they say 'Age ain't nothing but a number,' a credit rating ain't nothing but a letter.
For more analysis, click "Listen to this story" at the top of the page.
1. France and UK have AAA ratings.
2. Fitch and Moody's still hold AAA ratings for the US. S&P made a $2 trillion with a 'T' error in their downgrade to AA+ but decided to go with it anyway. Other countries with a more dire situation than the US now have a higher S&P rating than the US. S&P will now force S&P to downgrade other countries with or without math errors.
3. Printing money to get rid of debt is an option to get rid of the debt. Not sure if he said it's a good idea, but if you want to get rid of a debt that HAPPENS to be denominated in YOUR currency, then OF COURSE you can print money to get rid of it. Whether that course of action is smart is another matter. The same kind of matter as holding a country hostage with a debt ceiling debate for NO GOOD REASON.
4. Getting the interest rate to ZERO is the WHOLE POINT of the exercise.
i am confused. are these not the same people who committed fraud by rating the now toxic assets as a good invesment during the housing bubble to get more bizz and make more money? do they really think anyone believes them any more? or is this pay back for congress holding hearings into how they do decide there ratings in the first place. they should be in jail with the rest of the crooks.
John, you and Heidi are downplaying this too much. It is a problem. Rates will rise as a result. S&P estimates that if there is only 50-75 basis point increase in interest rates over next 18 months, that will still result in a 90% debt to GDP ratio by 2015. I have read their report and find it hard to argue with, in spite of their abysmal failures in the 2008 debacle. If you haven't actually yet read it, I suggest you do so. http://www.standardandpoors.com/ratings/articles/en/us/?assetID=12453165...
Remember what the "rating Agencies" did to us with their AAA rating of garbage.
What do the know? They actually would to be basing ratings in the interests of their primary clients and the pros should no how to interpret them.
However the rest of us are Kibitzers listening to arcane matters being reported by people who are reading words on a page.
You need to not panic and assess your own situation. Whe you get advice, make sure you can follow the reasoning and are able to get clarification.
Otherwise ignore it. Pay attention to what's going on but don't stop your life.
Most analysts haven't a clue. If you keep score most of them are wrong or at least misleading.
By the way, the stock market and the real economy, where people produce and consume goods and services are TWO SEPARATE entities. However the stock market serves to suck money out of the real economy in pursuit of overpriced assets.
The Stock Market does not provide new capital to an industry, except when a stock is first issued.
Bonds are what fund normal expansion.
The real economy tries to get going but the Fed and The govt insist on butting in. the QEs have had the effect of piling fertilizer on your lawn. It will kill the grass. The fed has filled up bank vaults with money at zero interest which has driven everyone's savings and money accounts to ZERO gain.
4 years after the first Black Friday the highest tax increment was 25%. In 1945 with a war to pay for it went to 90% and started the greatest growth period in history! WITH 7 MILLION VETERANS GOING TO COLLEGE ON THE GI BILL!
FEDERAL Taxes are not what slows down growth, because the business owner does not pay taxes on money spent on capital expansion and wages to workers.
In fact it encourages owners to pay workers a better wage which then enables workers to buy more goods and pay more taxes.
Stay interested in these interesting times...
but most of all, please: DON"T PANIC
I would like to start by stating:
NO! The AA+ US debt rating is NOT the new AAA rating that other country should aspire to possess. As matter of fact, the sentiment that there will business as usual is naive.
I feel, the added '+' to AA just adds insult to injury.
I foresee: this as the beginning of the end to the dominance of US dollar in the global market. Days of cheap foreign money and borrowing will soon come to an end. We will being paying higher interest and dig deeper in debt.
This is a mere warning of what is to come... If we do not heed to the symbolic gestures, we will be the next United Kingdom or France... or WORSE: GREECE.
Is the country blinded by exasperation?
John Carney's comments on your show in regards to the US being the world's currency and we can just print money to get out of any mess is laughable. In fact he should ask the Brits, as they held that distinction for over 200 years before us. The fact is that being the worlds currency is not guaranteed, no matter what anyone thinks and when you can't print money (as eventually it will become worthless) any longer what then? Love the show Kai but, ask the hard questions!
